Krung Thai Bank
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Political progress benefits banks, KTB the most
Krung Thai Bank Plc (KTB)
Concrete progress in Thailand’s transportation infrastructure investments to
boost the economic growth will be seen from now on after domestic political
situation has improved. The NCPO has recently approved a transportation
infrastructure development plan for the next eight year (2015-2022), which
includes road and rail projects, water transportation, air transportation, and
transport stations for connecting six borderlands in five special economic
zones. The most urgent project is six routes of double track rail (two of
which will start the construction process first) valued over B740bn in total.
- Up 2014-2015 ROE forecast to 15-16%
We revise up FY2014-2015 earnings forecast respectively by 9.2% and
8.3% from previously. Net loan growth and NIM forecasts are increased to
reflect reviving economy and investments in 2015 while credit cost and cost
to income ratio are reduced to reflect better asset quality and effective cost
controlling. Accordingly, 2014-2015 ROE is projected to increase from 13-
14% to 15-16%. Based on the revised forecast, FY2014-2015 net profit
would contract only 4.2%yoy (due to no dividend income from Vayupak
fund) before rebounding aggressively by 15.4%yoy in 2015.
- New 2014 fair value is B26.70
We recommend BUY for KTB. New 2014 fair value is B26.70 and new 2015
fair value is B29.16, based on PBV of 1.67x, versus 1.34x previously, using
GGM method. Long-term ROE forecast is increased from 14.1% to 17.0%.
The current share price provides total returns of 14.64% (average dividend
yield of 3.86% already included).
